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What you can do for high-income clients

Because the anti-forestalling rules involve a new tax charge which is immediately applicable, what clients don't do is likely to be as important, if not more, than what they do. The immediate priority is to ensure that we are familiar with the rules, and that clients are not disadvantaged as a result of them.

What to avoid

  • Don't forget high-income status effectively applies for 3 tax years. You should check income for your high-income clients for each tax year from 2007/08.

  • Don't advise high-income clients to make new or additional payments above £20,000. These will attract the special annual allowance charge.

How you can help your clients

  • Do consider using pension payments of up to £20,000 to reduce income below £130,000. Payments up to this amount will reduce the income that must be taken into account when assessing whether the client is a high-income individual.

  • Do consider salary sacrifice for non-pension benefits. Salary sacrificed for non-pension benefits will reduce the income that must be taken into account.

  • Do consider whether high-income individuals should try to reduce future income below £130,000. The anti-forestalling provisions only apply to tax years 2009/10 and 2010/11 but it is possible that the definition of high-income after 2011 will still include the previous two years' income.

  • Do suggest high-income clients maximise payments up to the £20,000 special annual allowance, particularly in 2010/11. Payments up to this amount will still receive higher rate relief, and in 2010/11 the applicable rate of tax is likely to be 50% (depending on the level of taxable income).

  • Do advise high-income clients to continue with existing regular payments. Protected pension input amounts will not be subject to the special annual allowance charge.

  • Do encourage self-employed clients to match previous single payments of up to £30,000 each year.

  • Do consider whether the client is best served by making employee or employer payments within the PPIA.

  • Do advise using other investments for high-income clients who wish to save more than £20,000 and are not already doing so in their pension.

Existing occupational pension schemes

An existing occupational pension scheme or GPP can change provider without losing protection. There are conditions that apply however, so if the pension scheme is closing and does not satisfy the rules surrounding a change of provider, try to set up a new arrangement for at least 20 members. This will allow regular payments up to the previous level to be PPIAs.

If material changes are being made to an existing occupational scheme, for example the contributions percentage or accrual rate, try to ensure the change applies to at least 50 members. This will allow regular payments up to the previous level to be PPIAs.

HMRC will look very closely at all arrangements designed to avoid the charge. Where the main purpose or one of the main purposes of the arrangement is to avoid liability to the special annual allowance charge, payments to the arrangement will not be regarded as protected pension input amounts.

Get in touch with HMRC

If you have concerns about the way in which the rules affect a specific client you can contact HMRC to clarify how the rules will affect them.

You may then put together a case for them to be treated differently (for example, there may have been a pattern of payments that aren't covered in HMRC's questions and answers on anti-forestalling).

You can use HRMC's online form to submit your query.

Note - The information provided is based on our current understanding of the 2009 Budget and associated documents and may be subject to alteration as a result of changes in legislation or practice.

Published 12 January 2010

Updated 9 March 2010